A friend of mine owns a business in the survival niche.
He recently said to a group of other business owners, “When the world is falling apart, and all your businesses are struggling, mine is booming.”
People buy his products when they feel fear.
And his cash flow would make you salivate.
However, he doesn’t sell a subscription or a regularly consumed product.
In fact, most people who buy his product will never use it (or at least they hope to never have to).
A $10M+ product
If you want to build a business to $10M+, you first need the right type of product.
It’s far easier to scale a business to 8-figures with one product than many.
So, first, you want to choose a product that can support the level of sales you wish to achieve without adding more products to get there.
Red Bull got to $1B in sales with a single 8.4 oz can. I think we can find a few $10M products.
The commoditization of online advertising
Today, you can easily see everything your competitors do to produce sales with ads.
By opening up Facebook Ad Library and searching for a brand name, you can see the ads businesses run, how long they’ve run them, and what pages they send prospective customers to.
And now, with AI, you can easily model any brand’s ads and landing pages.
Also, most businesses pay around the same price for ads. There’s only an $8, or 20%, difference in the price per 1,000 impressions Facebook charges me to advertise my free newsletter versus our bags of coffee.
What really matters to scaling
If everyone can copy each other’s ads and sales funnels, and everyone pays the same price for ads, then what really matters is how much each business makes from each customer.
If it costs both of us $50 to get a customer from Facebook ads, but I make $100 while you make only $40, I win. I can scale. You can’t. I take all the traffic for myself.
The business that makes the most per customer dominates.
They can keep increasing ad spend—and increase the incremental ad costs everyone else pays—to a point at which they’re still profitable, and everyone else is losing money.
The two best product types to scale
The whole goal of choosing a product is to maximize the total profit you make from each customer. There are two ways to do this.
Path 1: Consumable.
Coca-Cola makes only a few pennies per cup of soft drink. However, the average American consumes 403 servings of Coke products per year.
When selling a consumable product, you typically make little money upfront. But when you add up all the repeat purchases, you can make a lot of money.
That’s why businesses such as AG1 (Athletic Greens) and Gruns default to subscription when you visit their landing pages (check them out in Facebook Ad Library to go deeper).
They’re losing money upfront because it costs them a lot to get a new customer to sign up for a subscription. But when you look at their total profit per customer over two to three years, they’re profitable.
The founder of Gruns, which sells gummy vitamins, said he aims for the standard 3:1 lifetime value to customer acquisition cost over three years. If it costs him $80 to acquire a customer, he expects that customer to earn him $240 over three years.
Path 2: High-margin one-time product.
But consumable products aren’t the only way to make a lot per customer over multiple years.
Ferrari is worth around $60 billion. Most Ferrari owners don’t drive their cars much at all, meaning Ferraris are rarely “consumed”.
The reason Ferrari is worth so much is that it makes over $100,000 per product (car) sold.
It doesn’t matter if someone never buys another product if you make six figures upfront.
My friend’s survival business is similar. His most popular product sells for around $300. Most customers buy the product, throw it in their closet or basement, and never buy another one.
He has to make most of his profit per customer upfront—and he makes a lot of it.
When you sell a high-margin one-time purchase product, you don’t need the product to be consumed to make a lot of money.
The worst type of product to sell
If selling a consumable product or a high-margin one-time purchase product are both good paths to scale a business big, then what’s the worst type of product to sell?
A low-margin one-time purchase product with a small market.
If you’re going to sell a low-margin product, then make sure it’s consumable.
If you’re going to sell a one-time purchase product, then make sure it’s high-margin.
If you’re going to sell in a small niche, then make sure it’s really high-margin.
The last type of product you want to sell is a non-consumable, low-margin product in a niche market.
Yet, that’s how a lot of ecommerce businesses get started, and why they never scale past six- or maybe seven-figures.
Special announcement (secret project)
For the past five months, I’ve been working on a secret project with the two founders and the CEO of Helium 10, Manny, Gui, and Bojan.
We’re finally ready to let a few people get access.
We’ve built a powerful software platform to make creating high-performing AI video ads much easier and faster.
We’re using this platform to generate ads for Lifeboost Coffee every single day.
If you’re spending money on image and/or video ads, you want to see this.
Get on the waiting list now so you’re notified when we open a few spots this week.
JOIN THE WAITLIST—Matt